27 Aug 2021

£830 Million in tax relief wasted

When a higher or additional rate taxpayer makes personal contributions to a pension, they are entitled to 40% or 45% tax relief, but as only 20% is given automatically when the pension contribution is made in a tax relief at source pension, the excess must be claimed.

According to research a staggering sum of £830 million has not been claimed by individuals entitled to tax relief on their personal pension contributions, and instead this money stayed within the treasury’s coffers.

The claim for tax relief can be carried out via completing a self-assessment tax return, and you may think that it’s the failure to complete these that is resulting in so much money going to waste, but no. Apparently of those eligible who did complete a tax return, only one fifth of higher rate taxpayers and two fifths of additional rate taxpayers actually claimed what they were due – so it may be that they aren’t aware of the additional tax relief they can benefit from.

With the income tax thresholds freezing until 2026, without doubt more and more people will fall into a different tax band and hopefully they will be well informed and know what’s theirs to claim.